Real and imaginary problems of electronic cash transfers

Discussion in 'Politics & Society' started by Ray, Dec 2, 2012.

  1. Ray

    Ray The Chairman Defence Professionals Moderator

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    Real and imaginary problems of electronic cash transfers


    The Congress Party is about to launch what it hopes is an election winner — an electronic cash transfer scheme (CTS) to send government payments and subsidies directly into the accounts of beneficiaries, instead of through existing channels bedeviled by corruption and waste. Starting January 1, the government will transfer 29 sorts of benefits (like pensions, scholarships, fuel subsidies) through the CTS, taking advantage of the Aadhar scheme for electronic identification of all individuals. In due course the scheme will be expanded to cover 42 benefits, and will cover the whole country by 2014, in time for the next election.

    Right now, says finance minister P Chidambaram, it costs the government Rs 3 to transfer one rupee to the pockets of beneficiaries. The rest goes on administrative expenses, waste and corruption. Cash transfers can eliminate intermediaries of all sorts, greatly reducing corruption and administrative burdens.

    Right now, beneficiaries have to produce different paperwork for every benefit. CTS has the potential to consolidate all paperwork, drastically reducing red tape and improving efficiency. Total transfers are estimated at Rs 320,000 crore, so if just one-third going to waste and corruption is avoided, it will mean Rs 100,000 crore more cash to beneficiaries. This would hugely benefit hundreds of millions of people.

    A host of objections and criticisms have come from rival political parties and statist ideologues. Some problems of CTS are real, but many others are imaginary.

    The most imaginary and hilarious objection (from Arvind Kejriwal, the BJP and CPI) is that a cash transfer is a bribe to voters. Political parties have for decades offered welfare goodies such as free electricity and water, subsidized food, free TVs, free bicycles and so on. These are unashamed ways to woo voters. But a bribe is illegal gratification. Welfare giveaways can be called unwarranted or misdirected, but not illegal.

    Others say cash benefits for education or fuel may be diverted by a beneficiary to liquor instead. True, but this is equally true of benefits in kind. Mid-day school meals mean less family spending on food, so the money saved can be spent on liquor. Subsidised kerosene or rice can be sold in the open market and the proceeds used for liquor.

    In this, look at the example of the Nitish-BJP coalition government in Bihar. Nitish Kumar decided to use cash transfers instead of physical delivery of free bicycles for school kids, to eliminate the myriad leakages in physical delivery of other government services. Was some of the cash spent on liquor instead of bicycles? Maybe, but overall the scheme was a thumping success. Thus opposition parties have themselves proved the efficacy of cash transfers.

    Some critics claim that cash transfers will be a way of reducing total benefits. That's pure mendacity. In fact, much more money will actually reach beneficiaries, which is why rival politicians are so worried.

    Still others say cash transfers might mean the dismantling of all public systems like ration shops and government schools. Sorry, but the Congress is ideologically incapable of such libertarianism. Montek Ahluwalia has clarified that ration shops will continue, and government educational and health facilities are being expanded rapidly.

    However, there are indeed many real problems. There is no good system of identifying those truly in need, so benefits can go to better-off folk, especially those mis-identified by sarpanches. It may prove politically impossible to withdraw benefits from once-poor folk who become better off. Many poor illiterates may not be registered under Aadhar or may not be linked to bank accounts, and can get left out.

    However, such problems of inclusion and exclusion are so terrible in existing systems that even a flawed CTS should be far better. A big administrative effort will be needed to ensure that Aadhar and bank accounts eventually cover everybody.

    Many glitches will arise in rolling out such a scheme. Some pilot projects have already tested different transfers in different areas, and corrected the glitches. But more experimentation is needed. The danger is that the scheme will quickly be extended to the whole country in half-baked shape simply to help the election prospects of the Congress. This can mean a flawed CTS that later needs overhaul.

    The biggest danger is that CTS will not substitute existing subsidies but add to them. Vested interests will resist winding up any existing delivery mechanism. So instead of substituting subsidized kerosene or LPG with cash, politicians might provide both cash and subsidized fuel. Ditto for subsidized food, electricity, and dozens of other items. Such populist excesses would serious strain already stretched government finances. Provided this is avoided, cash transfers should be a big success.

    Real and imaginary problems of electronic cash transfers - The Economic Times

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    How far will this be successful and benefit the deprived?

    Or is it an election ploys?
     
    W.G.Ewald likes this.
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  3. Ray

    Ray The Chairman Defence Professionals Moderator

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    Congress risks Election Commission rap on cash transfer plan

    By announcing the direct cash transfer scheme and fielding senior ministers from the Congress platform, the Manmohan Singh government may have risked the ire of the Election Commission (EC).

    The election watchdog will meet on Sunday to deliberate over opposition BJP's complaint that cash transfers are essentially a poll sop, unveiled ahead of the Gujarat assembly election.

    The timing of the announcement in November although the scheme is to roll out only by January 1, 2013 and the use of the Congress plank by senior ministers P Chidambaram and Jairam Ramesh to pitch cash transfers as a "game-changer" seem to have caught the EC's attention.

    The commission will consider if the government's move violates the model code of conduct and skews the playing field in the poll-bound state where Gujarat CM Narendra Modi and Congress are locked in a straight fight.

    The government sees cash transfers as a major poll hook, coining the slogan "aap ke paise, aap ke haath" while seeing the benefits of the scheme in streamlining subsidies and getting rid of ghost beneficiaries. With the reform motif sitting cheek by jowl with a populist appeal, UPA sees cash transfers in the same league as rural employment guarantee and the nationwide loan-waiver.

    BJP is yet to take a formal view on cash transfers, recognizing the scheme's populist overtones, but is concentrating on raising objections to it timing and intent.

    More at:

    Congress risks Election Commission rap on cash transfer plan - The Times of India
     
  4. Ray

    Ray The Chairman Defence Professionals Moderator

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    Payment delays trip UPA’s cash transfer model in Rajasthan

    KOTKASIM (RAJASTHAN): If the year-old pilot programme on cash transfers in the Kotkasim block of 25,000 households is anything to go by, the scheme that the UPA reckons will be a "game changer" could be undone by non-payment of cash or payment delays. Across the block, most residents said they had either received no money for one year, or at best just one of four instalments.

    A ground-level assessment of this pilot project for cash transfer — whereby beneficiaries would get money in their account rather than subsidized goods — is instructional in many ways. In Kotkasim, a block in Rajasthan's Alwar district that borders Haryana, the numbers tell a revealing story. Kerosene sales here have plummeted by over 70%.

    The reason for this isn't clear. District collector Ashutosh Pednekar says it only shows widespread leakage. But residents of Kotkasim's five panchayats say it's persistent delays in the subsidy money reaching them which has made buying kerosene too expensive.

    'We just haven't seen this money yet'

    We use firewood to cook, and candles when the electricity goes, which is for over half the day," says Dharam Pal, a tailor from Bilahedi village, whose bank passbook shows he hasn't received a single rupee in subsidy yet.

    Last December, the Alwar district administration, in association with the state government and petroleum ministry, kicked off this pilot project. The plan was simple: Instead of selling subsidized kerosene at Rs 15.25 per litre for the first three litres that any ration card-holder could buy every month, kerosene would be sold at its market price (now Rs 49.10), and the difference deposited in the form of a direct cash subsidy transfer into the card-holder's bank account.

    The transfer would be done every three months. Diversion, leakage and fraud would be eliminated. Unfortunately, the scheme is being undone by payment delays. "We've no objection to the scheme as such. The problem is that we just haven't seen any of this money yet," says Ramphal Prajapati, a small farmer in Gheekaka village. Residents gather near the village fair price shop - pretty much obscured by decorations for a wedding—to thrust their Rajasthan Grameen Bank or State Bank of IndiaBSE 1.78 % passbook forward, with the balance still showing "0.00" from the day it was opened.

    Payment delays trip UPA’s cash transfer model in Rajasthan - The Economic Times

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    These glitches have to be resolved before it is taken up on an all India basis.

    Good schemes taken up in a half baked and not thought out completely only ruins the intent and make them appear to be populist and meaningless in drive to ensure the intent.

    Poorly thought out schemes involving the masses with cash only gives rise to the accusation that they are merely election oriented gimmicks and grind such rumour mills and give such rumours credibility.
     
  5. anoop_mig25

    anoop_mig25 Senior Member Senior Member

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    Would congress would be able to get votes of middle class by such schemes which voted heavily in its favour durning 2009 election. If news of corrution in this scheme starts pouring before 2014 then congress would loose the elections. Well any opposition has to ensure only thing . maker sure this scheme fails in congrees lead state and popularise it .
     
  6. W.G.Ewald

    W.G.Ewald Defence Professionals/ DFI member of 2 Defence Professionals

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    One of the benefits of an EFT system for government payments in the US is preventing assault of and theft from those receiving them. Everybody receiving social security benefits must have a bank account.
     

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